Purely for the sake of discussion, let’s assume the worst about Firestone and Ford: that someone’s gross negligence led to the production of tires that endangered drivers of Ford Explorers. The common law tort process should be allowed to take its course. If there’s evidence of criminal conduct, prosecute. But by no means should the government’s regulatory machinery, the National Highway Traffic Safety Administration (NHTSA), be beefed up. On the contrary, it should be abolished forthwith.
Why? Because it’s part of the problem. After all, NHTSA, whose airbag and fuel-efficiency mandates have demonstrably killed people, existed all the time the tire problems were occurring. A few years ago a State Farm insurance employee tried to alert NHTSA about the tires, but it ignored him. The pro-regulation folks reply that the agency was emasculated in the Reagan years and that its budget is 30 percent lower than it was in 1980. But do you think a bureaucracy exists that even by its proponents’ standards doesn’t waste at least 30 percent of its budget?
As Thomas Sowell says, in our world there are no solutions, only tradeoffs. Advocates of government regulation assume it is costless: not that there are no money expenses, but that nothing important is traded away when the state displaces the market as the protector of consumers. Yet economists over the last 40 years have documented the costs of government protection. Most dramatic is the literature about the Food and Drug Administration. We now know that government “protection” kills by delaying the availability of life-saving drugs. We also know that bureaucrats, despite the best intentions, face incentives that are adverse to the interests of consumers. An FDA official who delays approving a valuable drug because any post-approval mishap would bring him bad publicity is not serving the “public interest.”
What is true for the FDA is true for the NHTSA. This agency’s advocates want a bigger budget, more personnel, tougher standards, and more authority to recall tires. But those things are not costless. As Robert Levy of the Cato Institute points out, NHTSA bureaucrats would have an incentive to prematurely recall tires: if they don’t recall them and someone dies in a car equipped with them, they could have congressmen and reporters breathing down their necks. But if they recall the tires, no one would ever know whether anyone would have been killed or not. Face it: there is no perfectly safe tire. And in a world of scarcity, consumers would not want to pay for a tire or car that even approached perfect safety; its expense would force them to forgo other things that they value.
Another cost of an active bureaucracy is the inevitable delays and added expense of new tire technologies that don’t meet the government’s standards. Just as the FDA keeps life-saving medicines off the market (even when they are being used successfully in Europe), the NHTSA would very likely keep revolutionary tires off the road while they underwent unreasonably lengthy testing. (Producers of existing tires would support the delays in order to impede their competition.) Those new tires might save lives, but no one would know that and no bureaucrat would be held responsible for the needless deaths that would occur during the testing period.
The promise of government protection carries an even greater cost: diminished consumer vigilance because of the false sense of security the promise of government protection induces. The government cannot actually deliver on that promise — medical licensing has not eliminated quacks — but it’s the promise that counts. Since people generally believe the government looks out for them, they develop an unarticulated frame of mind summed up by the words: “They couldn’t sell that if it was dangerous.” A false sense of security is worse than no security at all. It sets people up to be victimized.
If the government stopped regulating, the buying public’s vigilance would grow. People would seek out information about safety. Entrepreneurs would respond. Private consumer advocacy would expand. Lives would be saved.